OECD maintains Korea's 1.5% growth forecast

Economy

Published: 19 Sep. 2023, 18:00 Updated: 19 Sep. 2023, 19:12

OECD maintains Korea's 1.5% growth forecast

Shipping containers are stacked up at a port in Busan on Aug. 1 [JOONGANG PHOTO]

The Organisation for Economic Co-operation and Development (OECD) kept Korea’s growth forecast steady at 1.5 percent from its earlier estimate in June, citing uncertainties caused by inflation and slowing Chinese growth.

The OECD also kept Korea’s growth forecast for next year unchanged at 2.1 percent, according to the report released Tuesday. Estimates for Korea’s inflation also remained the same at 3.4 percent this year and 2.6 percent in the following year.

The international organization cited a potential persistence of inflation, which could encourage the central bank to further tighten monetary policy and slow spending, according to the Ministry of Economy and Finance.

Disruptions in energy supply, such as for petroleum, coal and gas, as well as a potential rise in food prices due to El Nino and the war between Russia and Ukraine were also cited as uncertainties that could impose downside risks on the Korean economy.

“This is likely to limit the scope for any policy rate reductions until well into 2024 in most advanced economies,” said the OECD in the report.

“Stronger near-term efforts to rebuild fiscal space and ensure debt sustainability would conserve scarce resources to meet future policy priorities and respond effectively [to] future shocks. This would also improve the near term alignment of fiscal and monetary policies, reducing the burden on monetary policy to lower demand pressures and inflation,” it added.

The OECD has been slashing the growth forecast for Korea over the past year. Since projecting Korea to grow 2.7 percent in December 2021, the figure was revised down in the following estimates to as low as 1.5 percent in June.

The OECD revised up the growth forecast for the global economy this year to 3 percent, up 0.3 percentage points. The forecast for next year was revised down by 0.2 percentage points to 2.7 percent.

The growth projection for China was also revised down by 0.3 percentage points to 5.1 percent this year, the OECD said, citing the country’s structural problems centered on its property market. The forecast for next year was also revised down 0.5 percentage points to 4.6 percent.

It added the U.S. economy is more solid than it had expected on the back of accumulated household savings. It forecast the United States to grow 2.2 percent this year, up 0.6 percentage points from the earlier estimate. The country’s growth forecast for next year was also revised up by 0.3 percentage points to 1.3 percent.

BY JIN MIN-JI [jin.minji@joongang.co.kr]